A Practitioner’s Guide to Ethics in Alternative Dispute Resolution
Alternative Dispute Resolution (ADR) is an increasingly popular means of settling conflicts outside the court system. The key benefits of ADR are lower costs for the client and faster settlement of disputes. The parties also maintain greater control over the resolution process, and are afforded a level of privacy and confidentiality that’s not possible with a court case.
For ADR to be successful, however, participants should adhere to accepted norms of fairness and civility. In addition, attorneys and other practitioners must be aware of their ethical obligations when representing clients in an ADR setting.
This guide is designed to give law practitioners an overview of ethics in ADR. It emphasizes ethical considerations that are common in all jurisdictions, along with special provisions of the California Rules of Court. Attorneys should use this guide as a baseline and become familiar with the rules and recommendations of the jurisdictions where they practice.
The most common forms of ADR are negotiation, mediation, and arbitration. Choosing the right ADR process can help increase the odds of a successful resolution. Unless a contract or other legal agreement requires binding arbitration, the parties have flexibility in how they proceed.
Settlement negotiation has become an essential part of the resolution of any dispute. Even with traditional litigation, courts encourage parties to attempt to resolve their differences through private negotiation. Approximately 95 percent of cases are resolved through settlement without going to trial.
The purpose of negotiation is to help the parties find common ground and arrive at a mutually acceptable agreement. Parties who focus on arguing their position are likely to provoke an adversarial response that makes it difficult or impossible to resolve the dispute.
The objectives of mediation are the same as in negotiation, but a third-party neutral guides the parties through the resolution process. The mediator does not have the authority to make any decisions, only to help the parties reach a settlement.
Although mediation is less formal than a court proceeding, it does follow a multistage process that is designed to achieve results. The parties begin by describing the dispute and its impacts, then engage in joint discussion to define the issues involved. The mediator will meet with each party privately and, if appropriate, bring the parties back together for joint negotiation.
Of all the ADR processes, arbitration most closely resembles a court proceeding. It is structured by procedural rules according to the arbitration forum the parties agree to use. If arbitration is not required by contract, parties may submit to it by agreement. After submitting to arbitration, a party may not unilaterally withdraw.
Like a judge, an arbitrator has the authority to determine the outcome, which may be binding on the parties. Binding arbitration decisions can be enforced by a court, and usually can’t be appealed unless there’s evidence of corruption or fraud. A nonbinding decision is final only if the parties accept it.
General Ethical Considerations of ADR
ADR has become an integral part of legal practice, and an attorney’s ethical obligations to clients apply. Ethics can be tricky to navigate in the ADR context, where there are increasingly complex and sometimes conflicting rules and best practices. However, the following principles can help guide attorneys regardless of the ADR process.
Ensure Adequate Levels of Competency
An attorney is required to represent clients competently in all matters, including ADR. Therefore, practitioners have an obligation to familiarize themselves with ADR processes and understand the implications of any applicable laws and regulations. This is particularly important with regard to settlement. The practitioner should ensure that the settlement agreement is valid and enforceable, and in the client’s best interests.
Acknowledge the Client’s Authority
While the attorney serves as advisor and advocate, the client has the ultimate authority regarding decisions related to the objectives of the representation. A growing number of ethics experts believe that practitioners have an obligation to advise clients regarding alternatives to litigation, including ADR. Many clients will not be aware of these alternatives or how the process works.
However, only the client can decide whether to settle a matter and the lawyer must abide by that decision. Although the initiation of settlement discussions is not binding on the client, it can change the dynamic of the dispute. Therefore, the attorney should obtain the client’s informed consent before proceeding and discuss in detail the parameters of negotiations. If negotiations proceed, the attorney must act within the scope of delegated authority and not accept a settlement without the client’s consent.
Avoid Conflicts of Interest
An attorney may represent multiple clients in ADR if the clients’ interests are aligned and the attorney obtains each client’s informed written consent. However, the lawyer has an obligation to consider whether the relationships between the clients could become contentious based upon the relative strengths of their positions or their commitment to settlement. Additionally, settlement options could create situations in which the clients’ interests diverge. A lawyer may undertake such representation only if the outcome can reasonably be expected to resolve the matter in each client’s best interest.
One of an attorney’s most important obligations is to maintain the confidentiality of all information related to representation of the client. This can be challenging in ADR processes, which encourage candor in discussions as long as it does not harm the parties.
The ethical rules allow an attorney to disclose confidential information if the client gives informed consent or if the disclosure is required to further the goals of the representation. This gives practitioners a degree of latitude, but they should carefully consider any potential consequences and advise clients accordingly. If disclosure could materially prejudice the client or the ADR proceeding, it could run afoul of ethical rules even with client consent.
Communication is the hallmark of effective representation. An attorney must keep the client reasonably informed of the status of the case, and consult with the client prior to making any decisions that would affect the outcome. For example, the lawyer who receives a settlement offer should promptly advise the client of the substance of the offer unless the client has already indicated whether the offer is acceptable or given the lawyer authority to accept or reject it.
Select Examples from California
In addition to general ethical principles, practitioners must abide by ethics standards established by their jurisdiction, and any rules, regulations, and best practices specific to the ADR proceeding. Following are a few examples from California.
Honesty in Negotiation
California Business Code §6128 makes it a misdemeanor for any attorney to be involved in “deceit or collusion” or to willfully delay an action for personal gain. In the negotiation context, a lawyer may not make materially misleading claims that other parties may rely on in settlement. Furthermore, an attorney may not discourage a client from settling to generate higher fees. Unless otherwise authorized, the attorney must present all settlement offers to the client, even if the offer requires the attorney to waive all fees.
Attendance in Mediation
Some courts have established procedural rules for mediation. Rule 3.891 of the California Rules of Court gives the court authority to order mediation in any action where the amount in controversy does not exceed $50,000 for each plaintiff. Rule 3.894 requires that attorneys and their clients “attend all mediation sessions in person unless excused or permitted to attend by telephone.” Furthermore, each party must submit a list of the attorneys, representatives, and others who will participate in the mediation.
Conduct of Arbitration
Under the California Rules of Court, a wide range of civil matters may be submitted to arbitration. The rules provide for the selection of an arbitrator, conduct of hearings, rules of evidence and discovery, and other specifics related to judicial arbitration proceedings administered by the court system. Rule 3.830 states that parties are not required to participate in judicial arbitration and may proceed pursuant to their own arbitration agreement.
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